Gold Heartbeats – Money is gold and nothing else

Goldex Team

Editorial content

Good day and welcome to the first edition of Goldex’s “Gold Heartbeats”. In this bi-monthly report, we will take a serious, if slightly offbeat look at the world of gold. Be warned, however, we are structural bulls on gold. As we like to say… “As long as humanity exists, there will always be a reason to own gold” and as the famous JP Morgan once told the US Congress: “Money is gold and nothing else”.

So, let’s crack on, shall we? Since we are the superposition of being at Issue 1, we can really have a look at where gold stands. The 5-year chart looks pretty clear…$1350 is the level and then we move into new territory (Bloomberg):

The 30-year chart shows that $1350-$1400 level looks very key for further upside (Macrotrends).

And so, while Silicon Valley can make artificial meat, driverless cars, artificial intelligence and human-like robots, no-one, in this age of such frenetic scientific progress and development have been able to successfully do what the Alchemists tried. The finite amount of Element No. 79 on the Periodic Table coupled with the situation of our current world, means that we can only see gold higher in the near future.

Over the next few editions, we will discuss these issues in more depth. The combination of inequality, debt, money printing, nationalism, social media, technology, the retreat of globalisation/utopian values, fake news, surveillance society and ever-increasing government intervention in society means that the system that we all take for granted is very much under threat.

What was previously unthinkable behaviour of governments and politicians, have now become the norm and only within a matter of years and with very little pushback. Quantitative Easing, for example, was once only deployed as a desperate last resort that cried of “Moral Hazard”.  We used to hear about QE multiple times a day and today it is just a standard tool of monetary policy.

Indeed, governments and politicians, faced with ever more desperation to stay in power are promising ever more absurd policies that go completely against the grain of what we have learned from history in regards of how to conduct ourselves as a society. As politicians realise that the electorate doesn’t care (democracy) or can’t care (dictatorship) about bigger and bigger lies, the “new” policies seem to encroach more into the individual space and more into a territory that is not appropriate for Western Capitalist Democracies to enter into.

Both the left and the right are guilty of this. Whether it’s the fictitious apocalyptic hordes of hyper-aggressive zombie-like immigrants south of the US-Mexico border and the need to declare emergency powers to build the wall; or the tax cut the supposedly fiscally sensible Republicans made for the rich at a cost of trillions on the US national debt; or the Green New Deal mixed with the latest in vogue way of spending money that doesn’t exist (MMT), all parties and roads are on the same wave length…time is infinite and inflation doesn’t exist…great news…we can borrow and spend like mad.

Some Google trends:

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In the end, the powers will be trying to get away with the shame saying, “I can’t pay my debts, so I will print money via QE”.

The recent example of political pressure being put on Fed Chair by Mr Trump, Jerome Powell, is the clearest example yet, that independent monetary policy only lasted a few decades if that. The stock market goes down 20% and suddenly the Fed policy of interest rate normalisation is on hold. And this is with an economy that is near full employment… the debt is just too high…and the market knows this and also that the economic numbers from Asia are more than a little bit concerning.

Global debt has ballooned: from $84 trillion at the turn of the century to $173 trillion at the time of the 2008 financial crisis and to $250 trillion now (China is about $40 trillion of that pie). That is $250 trillion as a power of 10 = $250×1012 or said with zeros $250,000,000,000,000.  No problem, nothing to see here.

So, you get the point, right?  We are in the middle of madness. Check this: growth doesn’t exist to pay off the debt; central banks and governments keep intervening to rig the market; inequality and nationalism create conditions ripe for global conflict at worst or trade wars at best.  We told you it was madness, yes.

Over the next few weeks and months, we will develop these themes and analyse the news to identify the trends that make gold so important to not just buy but to hold. Here’s a sprinkling to get a flavour:  Turks Are Dumping Liras and Hoarding Dollars and The surprise cult of Modern Monetary Theory

We are optimistic and wish that Warren Buffet’s mocking of gold was justifiable. In a happy world where economies are growing, the world is at peace and inequality is subdued, then perhaps it would not be as important. The problem is that human history has a terrible record of consistent self-destruction over millennia. All the nations, city-states, empires and their currencies come and go and only gold remains. We finish with the same words we used to start our commentary… “Money is gold and nothing else”.

 

Important disclaimer: this document is not an official research report and the views expressed in it are those of the authors. The authors are not registered research analysts and there is no assurance the trends mentioned will continue or that the forecasts discussed will be realised. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000, therefore, this it does not give rise to rights to claim compensation under the Financial Services Compensation Scheme.

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